What is Job Costing?

Job Costing is an accounting method used to track the costs of a specific job or project. It is used by companies that produce unique, custom products or provide specific services, such as construction companies, consulting firms, or advertising agencies. It involves accumulating direct costs (materials, labor) and allocating indirect costs (overheads) to each individual job.

For Startups: For a service-based startup, job costing is crucial for determining the profitability of each client project. By accurately tracking the hours spent and other direct costs for a project, the startup can compare this to the project revenue and understand which types of projects are most profitable.

Example: A software development agency uses job costing to track all the developer hours and other costs associated with building a custom app for a client, allowing them to calculate the exact profit margin on that specific project.